DLF plans to reduce net debt by Rs 5000cr in FY13

Q: As of now, Sebi is very-very clear that all listed companies will have to have a mandatory 25% float. This means that the promoters of DLF will probably have to divest to about 4-5%, they are about 79%. You have the window till March 2013. When are we going to see that happening?

A: We have window upto June 2013 to divest that. If that is what the law is, every company will need to abide with that, so would we. It is still something which is 10 months into the future. So, honestly I don’t think that we are losing sleep on that issue right now. Let us see how it pans out.

Q: What are you looking at? Could it be a FPO, will be a private placement? What are the options?

A: As of right now, we have planned on what potential options we would go with currently.

Q: You have not even started the process, started thinking what has to be done.

A: We have not.

Q: You have got eight months left.

A: We have nine months. Nine months is a long time. These are relatively small transactions. So, we have nine months.

Q: What are you leaning towards? Would it be a private placement?

A: Wouldn’t be able to share with you right now.

Q: But would that also play a significant role in reducing your debt?

A: Honestly, it is the function of how that dilution takes place. If what you say is correct that there is a deadline of June 2013, the good news is that you wouldn’t have to wait very long to understand that.

Q: With how the economy is performing at the moment, what is your outlook as far as the property market is concerned?

A: We do believe that the economy is passing through a difficult phase. The consecutive interest rate hikes had an adverse sentiment. Also, the slower growth is not as it should be.

On the property market specifically, the good news is that one is not seeing a rise in delinquencies or people not paying up. One is seeing a slowdown in fresh leasing, but one is not seeing again a delinquencies on rentals.

Also, we have seen, as late as our last launches in March and April when we launched a few high products across the country, that for a product that is priced right and located right, the market still is there and it is a deep market. We are surprised as an example by our response in a city like Lucknow.

So, as long as you price something right, you have the reputation to bank on and your product is located right, I do believe there continuous to be a basic market. That is what will sustain the better players in the industry. Would interest rate regime help revise the market further? The answer is qualified yes.

Q: Are you seeing property prices coming down?

A: I am not an expert at this. There are other people who are experts at this. But we have clearly seen a slowdown in the pace of growth of prices. I think that is clear. Maybe there are some micro markets where you might have seen a complete plateauing as well. But atleast we are not seeing any sharp reduction. So, I don’t think in the immediate short-term prices are going to grow dramatically. But I do not expect a sharp ‘downturn’ as well.

Q: Commercial real estate is often seen as a very strong indicator of the economy. How is that business doing? Are you expecting a slowdown, are the vacancies going up?

A: Vacancies are not going up. But clearly new off-take is going down. We are seeing a slowing down of that. Our leasing numbers clearly support that. But there continues to be a cautious strengthening in the overall rentals especially in the NCR market. Our lease rentals today are higher than what they were earlier. We are clearly seeing an inching up there. But overall the fresh volume off-take is slowing down.

Q: What is DLF’s strategy through this slowdown, be it in commercial real-estate as well as residential markets?

A: DLF’s strategy is more or less the same what we have been trying to chart for the last couple of years. We continue to focus on cautiously selected new launches where we do believe that we have a differentiating skill set and differentiating product and continue to do well there. We continue to cautiously spend on capex for either land in the two preferred geographies of Delhi and Chandigarh or in completion of the existing WIP capital projects. But clearly not go hugely into building new capex.

We continue to divest non-core to keep on reducing the debt as well as reducing the management bandwidth that it entails and meet every commitment to every banker, stakeholder, every customer. I think across the next year or so as thing pick up, hopefully be in the situation where we can then harvest that up tide and move forward.